Benefit News

Burnham Benefits Bulletin - April 2016

ACA Litigation May Affect Employers

A New York district court will hear the first case on whether employers may reduce their employees' work hours in order to avoid providing health benefits required under the Affordable Care Act (ACA). The case is Marin v. Dave & Busters-a class action lawsuit claiming that the restaurant chain, Dave & Busters, violated federal law by intentionally interfering with its employees' eligibility for health benefits. The ACA requires applicable large employers (ALEs) to offer affordable, minimum value health insurance coverage to their full-time employees, or to pay a penalty. For this purpose, a "full-time employee" is defined as an employee that works, on average, at least 30 hours of service per week. In addition, Section 510 of the Employee Retirement Income Security Act (ERISA) prohibits employers and plan sponsors from interfering with an employee's rights to health benefits under the plan.

According to the group of about 10,000 employees who filed suit, their hours were significantly reduced for the purpose of keeping them below the ACA's "full-time employee" threshold. On February 9, 2016, the court rejected Dave & Busters' motion to dismiss the case. This is the first case of its kind, and will set a precedent for other employers who are considering or have implemented similar strategies regarding their employees' work hours as a result of the ACA.

The Department of Health and Human Services (HHS) announced that it has launched the second phase of its HIPAA audit program, which focuses on compliance with HIPAA's Privacy, Security and Breach Notification Rules. This second phase of the HIPAA audit program covers both covered entities and business associates. HHS' Office for Civil Rights (OCR) has already started sending emails to covered entities and business associates to verify their contact information. Next, OCR will send a pre-audit questionnaire to gather data about potential auditees. OCR will use this data to select covered entities and business associates for audits. According to OCR, these HIPAA audits are primarily a compliance improvement activity. However, if an audit reveals a serious compliance issue, OCR may initiate a compliance review to investigate.

To prepare for a possible HIPAA audit, covered entities and business associates should review their compliance with HIPAA's Privacy, Security and Breach Notification Rules. OCR has stated that it will post an updated audit protocol on its website closer to conducting the 2016 audits. Once it is available, this audit protocol can be used as a guide for internal self-audits of HIPAA compliance.

The Supreme Court on Tuesday afternoon (March 29, 2016), looking for a new way to spare religious non-profit institutions from any role in providing birth-control techniques for their employees even while assuring that those services are available, asked lawyers on both sides of seven cases to make new proposals on how both might be done.

In the two-page order lawyers were told to file one new brief on each side of the controversy, and then single replies, and to submit all filings by April 20. There was no indication that the Court would hold a new hearing on this deep controversy under the Affordable Care Act. If the lawyers on both sides cannot come up with ways to reconcile those two perceptions, the Court may have to move forward to decide the seven cases just as they came to the Court and as they stood for last week's oral argument.

Minimum Wage Law Updates

State of California Minimum Wage Hike Signed into Law

On April 4, 2016, Governor Jerry Brown signed a bill (SB-3) into law that will increase the minimum wage in California to $15 an hour by 2022. Under the bill, the minimum wage, currently $10 an hour, will increase to $10.50 an hour on January 1, 2017, then to $11 an hour on January 1, 2018, with $1 an hour per year increases thereafter until it reaches $15 an hour on January 1, 2022. Thereafter, the rate will be adjusted annually by the lesser of 3.5% or the rate of inflation. Businesses with 25 or fewer employees have an extra year to begin complying. The Governor can temporarily suspend the minimum rate hike if there is a forecasted budget deficit of at least 1% of revenue, or due to poor economic conditions, such as a decline in retail sales, or job loss.

Pasadena Minimum Wage Hike Adopted

On March 14, 2016, the City Council of the City of Pasadena adopted a minimum wage ordinance. The ordinance establishes a minimum wage for employees working within the city and includes several scheduled annual increases, based on employer size. For employers with more than 25 employees:

Effective July 1, 2016, the minimum wage will be $10.50 per hour.

Effective July 1, 2017, the minimum wage will increase to $12.00 per hour.

Effective July 1, 2018, the minimum wage will increase to $13.25 per hour.

For employers with 25 or fewer employees, effective July 1, 2017, the minimum wage will be $10.50 per hour, increasing to $12.00 per hour, effective July 1, 2018.

Did You Know?

The growing utilization of private exchanges could prove to be a game changer for health care. According to a recent Kaiser Family Foundation report, about 2.5 million people were enrolled through private exchanges in 2014, including about 1.7 million group plan enrollees, 700,000 individual Medicare enrollees and 100,000 individual enrollees.

The employers that are shifting employees to private exchanges tend to be in lower-wage industries. Still, many of the exchange platforms surveyed anticipated significant growth in the future across industry lines. This trend could be related to continued employer cost control.

Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

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